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Micah Fairchild Paylocity’s Payroll Caters to Small Business Market

3.5 stars Average rating: 3.5 (from 165 votes)
 By Micah Fairchild

Paylocity: An Independent Small Business Payroll Review

One of the more unique solutions we have reviewed thus far, Paylocity is a hybrid, web-based Payroll and HR solution that straddles the line between software and managed service. Specifically built for the lower end of the SMB market, Illinois-based Paylocity is one of the fastest growing (per the Inc. 5000 growth list) Payroll and HR offerings; building up its fledgling business from its 1997 inception to an impressive current 6K+ client base, 320 employees, and annual revenues in excess of $35M. More impressive though is the fact that the company has succeeded in capturing a staggering 97% customer retention rate for 10 years running—a distinction that is also joined by Paylocity’s receipt of “Service Bureau of the Year” (by the Independent Payroll Providers Association); “Sales Department of the Year”; and “Contact Center of the Year” (the latter two of which came from the business world’s Stevie Awards).

Paylocity’s Payroll Options

The company’s flagship product Web Pay is a (24/7 accessible) web-based payroll solution that features tools such as a paycheck calculator, pre-process register, online reporting tools, customizable calculations, comprehensive labor distribution, 3rd-party check and direct deposit capabilities, and QuickPay (a built-in feature geared towards speeding up processing times). While decidedly skewed towards businesses that have needs that extend beyond just simply payroll, Paylocity’s WebPay does provide one of the small business world’s only single, comprehensive systems for payroll and human resource software needs; and includes HR functionality such as rate history, EEO tracking (and reports), retirement plan setup, I-9 and E-verify tracking, and demographic tools such as employee biographies, company directory, and emergency contact fields.


Although certainly more involved as far as setup goes compared with more basic solutions, Paylocity does provide a level of customization that few similarly-situated vendors can compete with. First off, Paylocity addresses onboarding needs by including in their hiring functionalities a standard New Hire template that features options for demographics, earnings, deductions, and direct deposit set-up; a feature that customers can either choose to utilize as-is or build their own (thanks to the system’s huge allotment for template builds). Not only that though, but users are also provided with the ability to configure and consolidate the hundreds of available Web Pay fields in the manner they see fit. Further, Paylocity provides customers with an additional set of limited (but useful) Quick Edit Templates (for job changes, leave, and terminations) as well as the capability to set required fields and defaults. Partnered with these templates is Paylocity’s Custom Checklist feature which can be used for workflows to keep track of critical steps, run reports, and trigger notifications; and much like the abovementioned templates can be used as a stand-alone feature or customized to the user’s preference.


Much like the vast majority of enterprise applications on the market today, the single data center Paylocity uses is SSAE 16 (formerly SAS 70) compliant. Likewise, security measures are fairly standard and include redundant infrastructure (with near real-time backups transferred to a single disaster recovery center and upgrades performed at off hours); 256-bit encryption; automated monitoring (with on-call, live support); one-way hash password storage; per page ACL validation; CAPTCHA technology; Extended Validation Certificates; and SSL/TLS (Secure Socket Layer/ Transport Layer Security). However, it should be noted (regardless of the payroll application chosen) that, when dealing with information as sensitive as payroll, a full, updated description of the solution’s current security and information management protocols be reviewed at the time of purchase.


Paylocity Web Pay's reporting and analytics tool features 100 standard reports, a management dashboard, and provides users with a basic but easy-to-use yet ad-hoc report writer. Surprisingly (given the basic capabilities of the other aspects of the Paylocity system), the solution also has the advanced capabilities of a point-in-time reporting tool that allows users to run queries comparing month-to-month, year-to-year, or any other comparison timeline required. Further, with one of Paylocity’s newer tools HR Insight charts users can instantly access human resource information (e.g. headcount, employee status, etc.) and either select a chart type (column, pie, or bar) for a graphical display of that data or choose to export the information to Excel.

Tax Services

Maintaining near-constant communication with tax authorities nationwide, Paylocity’s staff are resident experts in the taxable monies arena—a fact that has lead them to process $3B+ annually in all 50 states and Puerto Rico. Plus, in order to ensure that returns are as error-free as possible, edit checks are conducted during the payroll process; with automated notifications flagging any potential data validity issues. Further, Paylocity tax services feature a daily electronic tax balancing functionality to ensure that the appropriate taxing bodies receive deposits in a timely manner. Customers that choose to leverage this service can opt for Paylocity to prepare and file 941 quarterly returns with the IRS; prepare state unemployment tax returns (and file with the appropriate state agencies); file Federal unemployment tax returns electronically; prepare and file state and local withholding tax returns; prepare and file 940 Federal Unemployment Tax returns with the IRS; provide and file 1099M forms (employee and employer copies); prepare all W-2s and file with the Social Security Administration; prepare and file state and local annual tax reconciliation; and generate quarterly and year-end reporting.

Paylocity’s Strengths

  • Paylocity’s New Hire and Quick Edit Templates, as well as Custom Checklists offer nearly unparalleled flexibility and customization capabilities.
  • Paylocity’s service center is a literally award-winning aspect of the vendor’s offerings.
  • In large part due to the fact that Paylocity is equally adept at working with small businesses up to large enterprises, the company’s Web Pay offering is highly scalable—capable of supporting a wide variety of employee populations.
  • Reporting and analytics for the Paylocity solution are especially strong for a small business payroll provider; and feature advanced capabilities such as point-in-time reporting and HR metrics.
  • Paylocity is capable of integrating with most of the leading small business accounting solutions such as QuickBooks, Sage, and Microsoft; as well as many retirement and health insurance providers.
  • Simple, intuitive navigation (mainly driven by customizable drop-down menus).
  • Paylocity’s Web Pay features a single, unified database for both payroll and HR information.

Paylocity’s Weaknesses

  • While uniquely situated as a hybrid Payroll solution, the fact of the matter is that by essentially splitting its loyalties between a web-based offering and an outsourcing partner, Paylocity succeeds in only providing a good (but not great) solution on both fronts.
  • Businesses that operate outside of standard business hours may find Paylocity’s support lacking given the strict 7am-7pm customer product service hours.
  • Although pricing can be tailored for a specific package, organizations with over 50 employees may find the $2-4 per person per month fee for Paylocity greater than they want (or need) to spend.
  • Outdated and outmoded employee portals forced a redesign in 2011—meaning that portals are now controlled by templates; which many businesses may find unappealing.

Short List Paylocity When:

  • You’re a small business that is looking to retain certain controls over payroll operations but seeking to outsource non-critical administrative and/or tax tasks.
  • Your needs include integration with HR, Accounting, and/or larger ERP applications.
  • Your resources for administratively-based HR functions are limited.
  • Your company has the capability and time resources to dedicate to utilizing the system’s more advanced reporting tools.

Consider an Alternative Payroll Solution When:

  • You are a small business that is explicitly seeking a wholly outsourced solution for your payroll needs.
  • Your immediate needs do not necessitate software or services for human resources or other functions outside of payroll.
  • Your setup needs involve rapid deployment.
  • Seeking a subscription versus a licensed pricing model. End

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 Filed In Categories: Small Busines Payroll
 Tags Tags: Small Business Solutions, Paylocity
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Author  Author: Micah Fairchild
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While decidedly skewed towards businesses that have needs that extend beyond just simply payroll, Paylocity’s WebPay does provide one of the small business world’s only single, comprehensive systems for payroll and human resource software needs.




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